BHB Bar Harbor Bankshares

Bar Harbor Bankshares (NYSE: BHB) reported second quarter 2017 net income of $6.6 million, or 42 cents per share. Core earnings totaled $8.1 million, or 52 cents per share. Net income increased 56% over the prior quarter and core earnings increased 21% reflecting the strength of the expanded operations. Merger-related and systems conversion costs in the second quarter of 2017 totaled $0.10 per share (after-tax).

SECOND QUARTER FINANCIAL HIGHLIGHTS (comparisons are to prior quarter unless otherwise stated):

• 11% increase in net interest income
• 10% increase in fee income
• 20 bps improvement in core ROA to .94% (non-GAAP measure)
• 56.0% efficiency ratio (non-GAAP measure)
• 7.1% annualized deposit growth
• 0.22% non-performing loans to total loans

President and Chief Executive Officer, Curtis C. Simard stated, “The second quarter results are reflective of the momentum and drive we experienced across all our markets. We remain focused on executing profitability strategies while maintaining our commitment to our communities. Not only did we experience strong and disciplined improvement in all performance metrics, we successfully completed our systems conversion on time and according to plan. This has been an active quarter in every way, and I am proud of what our teams have accomplished. It is a direct reflection of our commitment and what defines our culture.”

Mr. Simard further stated “We continue to strengthen our balance sheet by delivering positive operating leverage through revenue diversification and maximizing operational efficiencies. All the while, our commitment to credit risk and asset quality remains a top priority as the second quarter ratio of non-performing loans to total loans came in at a mere 22 basis points.”

RESULTS OF OPERATIONSGAAP earnings increased to $6.6 million in the second quarter from $4.2 million in the linked quarter driven by higher interest income and fee income, and lower merger related expenses. Core income, which is a non-GAAP measure excluding tax-effected acquisition and system related costs, was $8.1 million in the second quarter compared to $6.2 million in the prior quarter. Second quarter earnings includes a full quarter earnings from the Lake Sunapee Bank Group merger that closed on January 13, 2017. Net interest income was affected positively by a 6 basis point increase in net interest spread. The yield on earning assets also benefited from purchase loan accretion.

Total non-interest income increased $0.5 million to $6.6 million compared to $5.9 million in the prior quarter. Trust and investment management fees increased $0.5 million in the current quarter as we continue to leverage the expanded operations from the merger. Customer service fees increased $0.6 million compared to the prior quarter as a result of a higher number of ATM transactions and a full quarter impact from the acquired operations.

Non-interest expense decreased $0.8 million in the current quarter primarily due to lower merger related and system conversion costs. The efficiency ratio (a non-GAAP financial measure) was 56.0% compared to 63.0% in the prior quarter and 60.0% in the second quarter of 2016. This decrease reflects disciplined cost control and execution against anticipated cost saves with the acquisition.

The effective tax was 31.6% in the second quarter compared to 26.0% in the first quarter, reflecting higher pretax income. The first quarter also benefited from a merger related discrete tax adjustment that reduced the quarterly rate based on the revaluation of the Company’s net deferred tax assets to the New Hampshire state rate.

FINANCIAL CONDITIONTotal assets measured $3.5 billion at June 30, 2017. While total loan growth was relatively flat due to a large commercial real estate loan payoff just prior to quarter end, total average balances increased for the quarter. Commercial and industrial product lines increased 46.3% from the prior quarter, which are generally variable rate in nature and are favorable in the current interest rate environment.

The Company’s book value per share increased to $22.53 from $22.17 in the first quarter while tangible book value per share, a non-GAAP financial measure, increased to $15.44 from $15.07. The loan to deposit ratio improved to 107% from 109% in the prior quarter primarily due to growth in time deposits as we continue to leverage and deepen the expanded customer base. Asset quality continues to be strong as the ratio of non-accruing loans to total loans decreased to 0.22% from 0.25% in the previous quarter and net charge-offs to total loans remains close to zero at 0.03%.

BACKGROUNDBar Harbor Bankshares (NYSE MKT: BHB) is the parent company of its wholly owned subsidiary, Bar Harbor Bank & Trust. Founded in 1887, Bar Harbor Bank & Trust is a true community bank serving the financial needs of its clients for over 125 years. Bar Harbor provides full service community banking with office locations in all three Northern New England states of Maine, New Hampshire and Vermont. For more information, visit www.bhbt.com.

FORWARD LOOKING STATEMENTSThis document contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. There are several factors that could cause actual results to differ significantly from expectations described in the forward-looking statements. For a discussion of such factors, please see the Company’s most recent reports on Forms 10-K and 10-Q filed with the Securities and Exchange Commission and available on the SEC’s website at www.sec.gov. The Company does not undertake any obligation to update forward-looking statements.

NON-GAAP FINANCIAL MEASURESThis document contains certain non-GAAP financial measures in addition to results presented in accordance with Generally Accepted Accounting Principles (“GAAP”). These non-GAAP measures provide supplemental perspectives on operating results, performance trends, and financial condition. They are not a substitute for GAAP measures; they should be read and used in conjunction with the Company’s GAAP financial information. A reconciliation of non-GAAP financial measures to GAAP measures is included beginning on page J in the accompanying financial tables. In all cases, it should be understood that non-GAAP per share measures do not depict amounts that accrue directly to the benefit of shareholders.

The Company utilizes the non-GAAP measure of core earnings in evaluating operating trends, including components for core revenue and expense. These measures exclude items which the Company does not view as related to its normalized operations. These items include securities gains/losses, merger costs, restructuring costs, and systems conversion costs. Non-core adjustments are presented net of an adjustment for income tax expense. This adjustment is determined as the difference between the GAAP tax rate and the effective tax rate applicable to core income. The efficiency ratio is adjusted for non-core revenue and expense items and for tax preference items. The Company also calculates measures related to tangible equity, which adjust equity (and assets where applicable) to exclude intangible assets due to the importance of these measures to the investment community. Charges related to merger of Lake Sunapee Bank Group consists primarily of severance and retention cost, systems conversion and integration costs, and professional fees. The Company’s disclosure of organic growth of loans in 2017 is also adjusted for the Lake Sunapee Bank Group merger.

        TABLE

INDEX

    CONSOLIDATED FINANCIAL SCHEDULES (UNAUDITED)

A

   

Selected Financial Highlights

C

Balance Sheets

D

Loan and Deposit Analysis

E

Statements of Income

F

Statements of Income (Five Quarter Trend)

G

Average Yields and Costs

H

Average Balances

I

Asset Quality Analysis

J

Reconciliation of Non-GAAP Financial Measures (Five Quarter Trend) and Supplementary Data

  BAR HARBOR BANKSHARES SELECTED FINANCIAL HIGHLIGHTS - UNAUDITED     At or for the Quarters Ended (1)(3)   Jun 30,2017 (3)     Mar 31,2017     Dec 31,2016     Sep 30,2016     Jun 30,2016 PER SHARE DATA Net earnings, diluted $ 0.42 $ 0.29 $ 0.28 $ 0.40 $ 0.47 Core earnings, diluted (1) (2) 0.52 0.43 0.41 0.34 0.39 Total book value 22.53 22.17 17.19 18.09 18.27 Tangible book value (2) 15.44 15.07 16.61 17.51 17.67 Market price at period end 30.82 33.08 31.55 24.48 23.40 Dividends 0.187 0.187 0.187 0.183 0.180   PERFORMANCE RATIOS Return on assets 0.76 % 0.50 % 0.59 % 0.86 % 1.04 % Core return on assets (1) (2) 0.94 0.74 0.87 0.73 0.85 Return on equity 7.55 5.34 6.36 8.78 10.67 Core return on equity (1) (2) 9.32 7.88 9.34 7.49 8.72 Core return on tangible equity (1) (2) 13.78 12.24 9.66 7.75 9.03 Net interest margin, fully taxable equivalent (FTE) (4) 3.16 3.11 2.89 2.84 3.04 Net interest margin (FTE), excluding purchased loan accretion (4) 3.02 3.01 2.89 2.84 3.04 Efficiency ratio (2) 0.56 0.63 0.61 0.62 0.6   GROWTH (Year-to-date) Total commercial loans, (annualized) (2) (5.4 )% 20.0 % 14.9 % 3.3 % (0.1 )% Total loans, (annualized) (2) 0.7 13.3 15.0 15.0 16.9 Total deposits, (annualized) (2) 7.1 (10.2 ) 6.5 17.7 11.3   FINANCIAL DATA (In millions) Total assets $ 3,503 $ 3,427 $ 1,755 $ 1,718 $ 1,688 Total earning assets 3,139 3,139 1,683 1,649 1,608 Total investments 763 767 554 561 559 Total loans 2,377 2,372 1,129 1,088 1,049 Allowance for loan losses 11 11 10 10 10 Total goodwill and intangible assets 109 109 5 5 5 Total deposits 2,213 2,174 1,050 1,034 990 Total shareholders' equity 347 341 157 164 165 Net income 7 4 3 4 4 Core income (4) 8 6 4 3 4   ASSET QUALITY AND CONDITION RATIOS Net charge-offs (current quarter annualized)/average loans (5) 0.03 % 0.06 % (0.03 )% (0.03 )% 0.03 % Allowance for loan losses/total loans (5) 0.48 0.46 0.92 0.93 0.94 Loans/deposits 107 109 108 105 106 Shareholders' equity to total assets 9.91 9.95 8.93 9.57 9.79 Tangible shareholders' equity to tangible assets (2) 7.01   6.99   8.65   9.29   9.50  

(1) Adjusted measurements are non-GAAP financial measures that are adjusted to exclude net non-operating charges primarily related to acquisitions, and gain on sale of securities. Refer to the Reconciliation of Non-GAAP Financial Measures in table J for additional information.(2) Non-GAAP financial measure.(3) All performance ratios are annualized and are based on average balance sheet amounts, where applicable. (4) Fully taxable equivalent considers the impact of tax advantaged investment securities and loans. (5) Generally accepted accounting principles require that loans acquired in a business combination be recorded at fair value, whereas loans from business activities are recorded at cost. The fair value of loans acquired in a business combination includes expected loan losses, and there is no loan loss allowance recorded for these loans at the time of acquisition. Accordingly, the ratio of the loan loss allowance to total loans is reduced as a result of the existence of such loans, and this measure is not directly comparable to prior periods. Similarly, net loan charge-offs are normally reduced for loans acquired in a business combination since these loans are recorded net of expected loan losses. Therefore, the ratio of net loan charge-offs to average loans is reduced as a result of the existence of such loans, and this measure is not directly comparable to prior periods. Other institutions may have loans acquired in a business combination, and therefore there may be no direct comparability of these ratios between and among other institutions.

BAR HARBOR BANKSHARES CONSOLIDATED BALANCE SHEETS - UNAUDITED             (In thousands) June 30, 2017 March 31, 2017 (1) December 31, 2016 Assets Cash and due from banks $ 28,112 $ 29,245 $ 8,219 Interest-bearing deposit with the Federal Reserve Bank 90,881   12,781   220   Total cash and cash equivalents 118,993 3,385,456 8,439 Securities available for sale, at fair value 718,364 724,224 528,856 Federal Home Loan Bank stock 44,168   42,404   25,331   Total securities 762,532 766,628 554,187 Commercial real estate 738,584 779,635 418,119 Commercial and industrial 350,002 309,995 151,240 Residential real estate 1,160,832 1,155,436 506,612 Consumer 127,229   127,370   53,093   Total loans 2,376,647 2,372,436 1,129,064 Less: Allowance for loan losses (11,442 ) (10,884 ) (10,419 ) Net loans 2,365,205 2,361,552 1,118,645   Premises and equipment, net 48,590 45,581 23,419 Other real estate owned 122 363 90 Goodwill 100,255 99,901 4,935 Other intangible assets 9,047 9,282 377 Cash surrender value of bank-owned life insurance 57,233 56,627 24,450 Deferred tax asset, net 13,211 14,158 5,990 Other assets 28,223   31,364   14,817   Total assets $ 3,503,411   $ 3,427,483   $ 1,755,349     Liabilities and shareholders' equity Demand and other non-interest bearing deposits $ 332,339 $ 349,896 $ 98,856 NOW deposits 451,171 242,876 175,150 Savings deposits 360,306 511,091 77,623 Money market deposits 285,312 349,491 282,234 Time deposits 783,876   720,899   416,437   Total deposits 2,213,004 2,174,253 1,050,300   Senior borrowings 872,021 842,150 531,596 Subordinated borrowings 43,063   43,078   5,000   Total borrowings 915,084 885,228 536,596   Other liabilities 28,201   26,954   11,713   Total liabilities 3,156,289 3,086,435 1,598,609   Total common shareholders' equity 347,122   341,048   156,740   Total liabilities and shareholders' equity $ 3,503,411   $ 3,427,483   $ 1,755,349     Net shares outstanding (2)   15,407   15,385   9,116  

(1) The Company completed the merger with Lake Sunapee Bank Group on January 13, 2017.(2) Adjusted for 3-for-2 stock-split March 2017.

BAR HARBOR BANKSHARES CONSOLIDATED LOAN & DEPOSIT ANALYSIS - UNAUDITED  

LOAN ANALYSIS

                    Organic Annualized Growth % (1) June 30, 2017 (in thousands) Jun 30, 2017 Balance Mar 31, 2017 Balance Acquired Lake Sunapee Bank Balance (2) Dec 31, 2016 Balance Quarter End     Year to Date Commercial real estate $ 738,584 $ 779,635 $ 345,586 $ 418,119 (21.1 )% (12.0 )% Commercial and industrial 263,903   236,526   89,259   135,564   46.3 % 57.7 % Total commercial loans 1,002,487 1,016,161 434,845 553,683 (5.4 )% 5.0 % Residential real estate 1,160,832 1,155,436 652,255 506,612 1.9 % 0.8 % Consumer 127,229 127,370 76,489 53,093 (0.4 )% (8.9 )% Tax exempt and other 86,099   73,469   44,611   15,676   68.8 % 329.3 % Total loans $ 2,376,647   $ 2,372,436   $ 1,208,200   $ 1,129,064   0.7 % 7.0 %

(1) Non-GAAP financial measure.(2) Acquired Lake Sunapee Bank loans are as of January 13, 2017.

DEPOSIT ANALYSIS

                    Organic Annualized Growth % (1) June 30, 2017 (in thousands) Jun 30, 2017 Balance Mar 31, 2017 Balance Acquired Lake Sunapee Bank Balance (2) Dec 31, 2016 Balance Quarter End     Year to Date Demand $ 332,339 $ 349,896 $ 248,051 $ 98,856 (20.1 )% (29.5 )% NOW 451,171 242,876 39,999 175,150 343.0 % 269.5 % Money market 285,312 349,491 103,142 282,234 (73.5 )% (70.9 )% Savings 360,306   511,091   467,735   77,623   (118.0 )% (476.8 )% Total non-maturity deposits 1,429,128 1,453,354 858,927 633,863 (6.7 )% (20.1 )% Total time deposits 783,876   720,899   291,684   416,437   34.9 % 36.4 % Total deposits $ 2,213,004   $ 2,174,253   $ 1,150,611   $ 1,050,300   7.1 % 2.3 %

(1) Non-GAAP financial measure.(2) Acquired Lake Sunapee Bank deposits are as of January 13, 2017.

BAR HARBOR BANKSHARES CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED                 Three Months Ended June 30, Six Months Ended June 30, (In thousands, except per share data) 2017 2016 2017 2016 Interest and dividend income Loans $ 24,226 $ 10,249 $ 45,420 $ 20,332 Securities and other 5,439   4,105   10,430   8,186   Total interest and dividend income 29,665 14,354 55,850 28,518 Interest expense Deposits 2,539 1,599 4,749 3,176 Borrowings 3,317   1,373   5,920   2,624   Total interest expense 5,856   2,972   10,669   5,800   Net interest income 23,809   11,382   45,181   22,718   Provision for loan losses 736 150 1,531 615 Net interest income after provision for loan losses 23,073   11,232   43,650   22,103   Non-interest income Trust and investment management fee income 3,324 955 6,188 1,903 Insurance and brokerage service income 327 — 691 — Customer service fees 1,991 252 3,351 463 Gain on sales of securities, net — 1,699 — 3,135 Bank-owned life insurance income 386 118 785 343 Other income 530   590   1,489   1,098   Total non-interest income 6,558   3,614   12,504   6,942   Non-interest expense Salaries and employee benefits 10,127 4,799 20,448 9,816 Occupancy and equipment 3,013 1,152 5,679 2,310 Loss on sales of premises and equipment, net — — 95 — Outside services 716 139 1,313 249 Professional services 489 710 929 834 Communication 290 271 658 364 Amortization of intangible assets 188 1 345 2 Merger expenses 2,459 492 5,571 492 Other expenses 2,764   949   5,341   2,226   Total non-interest expense 20,046   8,731   40,877   16,729     Income before income taxes 9,585 6,115 15,277 12,316 Income tax expense 3,029   1,804   4,510   3,600   Net income $ 6,556   $ 4,311   $ 10,767   $ 8,716     Earnings per share: Basic (1) $ 0.43 $ 0.48 $ 0.72 $ 0.97 Diluted (1) 0.42 0.47 0.72 0.96   Weighted average shares outstanding: Basic (1) 15,393 9,023 14,935 9,023 Diluted (1) 15,506   9,125   15,049   9,125  

(1) Adjusted for 3-for-2 stock-split completed in March 2017

BAR HARBOR BANKSHARES CONSOLIDATED STATEMENTS OF INCOME (5 Quarter Trend) - UNAUDITED                     (In thousands, except per share data) Jun 30,2017 Mar 31,2017 Dec 31,2016 Sep 30,2016 Jun 30,2016 Interest and dividend income Loans $ 24,226 $ 21,194 $ 11,026 $ 10,295 $ 10,249 Securities and other 5,439   4,991   3,820   3,828   4,105 Total interest and dividend income 29,665 26,185 14,846 14,123 14,354 Interest expense Deposits 2,539 2,210 1,768 1,755 1,599 Borrowings 3,317   2,603   1,421   1,369   1,373 Total interest expense 5,856   4,813   3,189   3,124   2,972 Net interest income 23,809 21,372 11,657 10,999 11,382 Provision for loan losses 736   795   225   139   150 Net interest income after provision for loan losses 23,073   20,577   11,432   10,860   11,232 Non-interest income Trust and investment management fee income 3,324 2,864 951 975 955 Insurance and brokerage service income 327 364 — — — Customer service fees 1,991 1,360 188 215 252 Gain on sales of securities, net — — 9 1,354 1,699 Bank-owned life insurance income 386 399 163 197 118 Other income 530   959   724   631   590 Total non-interest income 6,558   5,946   2,035   3,372   3,614 Non-interest expense Salaries and employee benefits 10,127 10,321 5,127 4,832 4,799 Occupancy and equipment 3,013 2,666 1,144 1,156 1,152 Loss on sales of premises and equipment,net — 95 32 216 — Outside services 716 597 337 181 139 Professional services 489 440 405 250 710 Communication 290 368 94 128 271 Amortization of intangible assets 188 157 1 1 1 Merger expenses 2,459 3,112 1,838 320 492 Other expenses 2,764   2,695   1,269   1,506   949 Total non-interest expense 20,046   20,831   10,457   8,750   8,731   Income before income taxes 9,585 5,692 3,010 5,482 6,115 Income tax expense 3,029   1,481   426   1,850   1,804 Net income $ 6,556   $ 4,211   $ 2,584   $ 3,632   $ 4,311   Earnings per share: Basic (1) $ 0.43 $ 0.29 $ 0.28 $ 0.40 $ 0.48 Diluted (1) 0.42 0.29 0.28 0.40 0.47   Weighted average shares outstanding: Basic (1) 15,393 14,471 9,096 9,064 9,032 Diluted (1)   15,506     14,591     9,215     9,162     9,129

(1) Adjusted for 3-for-2 stock split completed in March 2017

BAR HARBOR BANKSHARES AVERAGE YIELDS AND COSTS (Fully Taxable Equivalent - Annualized) - UNAUDITED                     Quarters Ended   Jun 30,2017 Mar 31,2017 Dec 31,2016 Sep 30,2016 Jun 30,2016 Earning assets Loans 4.14 % 4.00 % 3.94 % 3.89 % 4.03 % Securities and other 3.19   3.01   3.01   3.07   3.37   Total earning assets 3.91 % 3.76 % 3.65 % 3.62 % 3.80 %   Funding liabilities Interest bearing deposits 0.56 % 0.52 % 0.76 % 0.78 % 0.76 % Borrowings 1.41   1.25   1.05   1.06   0.99   Total interest-bearing liabilities 0.85 % 0.76 % 0.86 % 0.88 % 0.85 %                                 Net interest spread 3.06 3.00 2.79 2.74 2.95 Net interest margin     3.16       3.11       2.89       2.84       3.04     BAR HARBOR BANKSHARES AVERAGE BALANCES - UNAUDITED                     Quarters Ended (In thousands) Jun 30,2017 Mar 31,2017 Dec 31,2016 Sep 30,2016 Jun 30,2016 Assets Total loans (1) $ 2,377,141 $ 2,346,340 $ 1,119,065 $ 1,058,253 $ 1,028,748 Securities and other (2) 761,546   746,653   556,365   551,456   546,917   Total earning assets 3,138,687 3,092,994 1,675,430 1,609,709 1,575,665 Cash and due from banks 87,332 25,556 5,976 5,819 5,400 Allowance for loan losses (11,292 ) (10,584 ) (10,336 ) (10,095 ) (10,036 ) Goodwill and other intangible assets 109,108 109,261 5,324 5,347 5,370 Other assets 110,129   122,396   71,807   78,755   75,177   Total assets $ 3,433,964   $ 3,339,623   $ 1,748,201   $ 1,689,535   $ 1,651,576     Liabilities and shareholders' equity Total interest-bearing deposits $ 1,811,226 $ 1,798,014 $ 930,983 $ 897,703 $ 845,042 Borrowings 941,789   856,328   537,818   514,999   557,593   Total interest-bearing liabilities 2,753,015 2,654,343 1,468,801 1,412,702 1,402,635 Non-interest-bearing demand deposits 320,503 350,497 108,961 103,971 80,119 Other liabilities 13,145   19,334   7,929   7,376   7,147   Total liabilities 3,086,663 3,024,174 1,585,691 1,524,049 1,489,901   Total shareholders' equity 347,301 315,449 162,510 165,486 161,675             Total liabilities and shareholders' equity $ 3,433,964   $ 3,339,623   $ 1,748,201   $ 1,689,535   $ 1,651,576  

(1) Total loans include non-accruing loans.(2) Average balances for securities available-for-sale are based on amortized cost.

  BAR HARBOR BANKSHARES ASSET QUALITY ANALYSIS - UNAUDITED                     At or for the Quarters Ended (in thousands) Jun 30,2017 Mar 31,2017 Dec 31,2016 Sep 30,2016 Jun 30,2016 NON-PERFORMING ASSETS Non-accruing loans: Commercial real estate $ 2,090 $ 2,354 $ 2,564 $ 2,478 $ 1,900 Commercial installment 270 451 315 276 190 Residential real estate 2,783 3,066 3,419 3,429 3,157 Consumer installment 160   160   198   219   225   Total non-accruing loans 5,303 6,031 6,496 6,402 5,472 Other real estate owned 122   363   90   189   209   Total non-performing assets $ 5,425   $ 6,394   $ 6,586   $ 6,591   $ 5,681     Total non-accruing loans/total loans 0.22 % 0.25 % 0.58 % 0.59 % 0.52 % Total non-performing assets/total assets 0.15 0.19 0.38 0.38 0.34   PROVISION AND ALLOWANCE FOR LOAN LOSSES Balance at beginning of period $ 10,884 $ 10,419 $ 10,103 $ 9,891 $ 9,814 Charged-off loans (214 ) (344 ) (28 ) (120 ) (99 ) Recoveries on charged-off loans 35   14   119   193   26   Net loans charged-off (178 ) (330 ) 91 73 (73 ) Provision for loan losses 736   795   225   139   150   Balance at end of period $ 11,442   $ 10,884   $ 10,419   $ 10,103   $ 9,891     Allowance for loan losses/total loans 0.48 % 0.46 % 0.92 % 0.93 % 0.94 % Allowance for loan losses/non-accruing loans 216 181 160 158 181   NET LOAN CHARGE-OFFS Commercial real estate $ (6 ) $ (103 ) $ 5 $ (77 ) $ 7 Commercial installment (138 ) (17 ) 89 156 2 Residential real estate (13 ) (198 ) 8 (11 ) (83 ) Consumer installment (22 ) (12 ) (11 ) 5   1   Total, net $ (178 ) $ (330 ) $ 91   $ 73   $ (73 )   Net charge-offs (QTD annualized)/average loans 0.03 % 0.06 % (0.03 )% (0.03 )% 0.03 % Net charge-offs (YTD annualized)/average loans 0.04 0.06 (0.03 ) 0.01 0.03   DELINQUENT AND NON-ACCRUING LOANS/TOTAL LOANS 30-89 Days delinquent 0.55 % 0.33 % 0.54 % 0.15 % 0.32 % 90+ Days delinquent and still accruing —   —   —   —   0.01   Total accruing delinquent loans 0.55 0.33 0.54 0.15 0.33 Non-accruing loans 0.22   0.25   0.58   0.59   0.52   Total delinquent and non-accruing loans 0.77 % 0.58 % 1.12 % 0.74 % 0.85 %   BAR HARBOR BANKSHARES RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND SUPPLEMENTARY DATA- UNAUDITED     At or for the Quarters Ended (in thousands)   Jun 30,2017     Mar 31,2017     Dec 31,2016     Sep 30,2016     Jun 30,2016 Net income $ 6,556 $ 4,211 $ 2,584 $ 3,632 $ 4,311 Adj: Security Gains — — (9 ) (1,354 ) (1,699 ) Adj: Loss on sale of fixed assets, net — 95 32 216 — Adj: Merger and acquisition expense 2,459 3,112 1,838 320 492 Adj: Income taxes (37.57% in 2017, 35.0% in 2016)   (924 ) (1,205 ) (651 ) 286   422   Total core income (4) (A) $ 8,091   $ 6,213   $ 3,794   $ 3,100   $ 3,526     Net-interest income $ 23,809 $ 21,372 $ 11,657 $ 10,999 $ 11,382 Plus: Non-interest income   6,558   5,946   2,035   3,372   3,614   Total Revenue 30,367 27,318 13,692 14,371 14,996 Adj: Net security gains   —   —   (9 ) (1,354 ) (1,699 ) Total core revenue (4) (B) $ 30,367   $ 27,318   $ 13,683   $ 13,017   $ 13,297     Total non-interest expense $ 20,046 $ 20,831 $ 10,457 $ 8,750 $ 8,731 Less: Merger and acquisition expense   (2,459 ) (3,112 ) (1,838 ) (320 ) (492 ) Core non-interest expense (4) (C) $ 17,587   $ 17,719   $ 8,619   $ 8,430   $ 8,239     (in millions, except per share data) Total average assets (D) $ 3,434 $ 3,340 $ 1,748 $ 1,690 $ 1,652 Total average shareholders' equity (E) 347 315 163 165 162 Total average tangible shareholders' equity (F) 238 206 157 160 156 Total tangible shareholders' equity, period-end (1) (G) 238 232 151 159 160 Total tangible assets, period-end (1) (H) 3,394 3,318 1,750 1,713 1,682   Total common shares outstanding, period-end (thousands) (I) 15,407 15,385 9,116 9,084 9,045 Average diluted shares outstanding (thousands) (J) 15,506 14,591 9,215 9,162 9,129   Core earnings per share, diluted (A/J) $ 0.52 $ 0.43 $ 0.41 $ 0.34 $ 0.39 Tangible book value per share, period-end (G/I) 15.44 15.07 16.61 17.51 17.67 Total tangible shareholders' equity/total tangible assets (G)/(H) 7.01 6.99 8.65 9.29 9.50   Performance ratios (2) GAAP return on assets 0.76 % 0.50 % 0.59 % 0.86 % 1.04 % Core return on assets (4) (A/D) 0.94 0.74 0.86 0.70 0.85 GAAP return on equity 7.55 5.34 6.36 8.78 10.67 Core return on equity (4) (A/E) 9.32 7.88 9.29 7.15 8.72 Core return on tangible equity (3) (4) (A/F) 13.78 12.24 9.60 7.39 9.03 Efficiency ratio (4)(5) (C-M)/ (B+N) 0.56 0.63 0.61 0.62 0.60 Net interest margin 3.16 3.11 2.89 2.84 3.04   Supplementary data (in thousands) Fully taxable equivalent income adjustment (N) $ 813 $ 754 $ 519 $ 511 $ 526 Intangible amortization (M)     188       157       1       1       1  

(1) Total tangible shareholders' equity is computed by taking total shareholders' equity less the intangible assets at period-end. Total tangible assets is computed by taking total assets less the intangible assets at period-end.(2) Ratios are annualized and based on average balance sheet amounts, where applicable. Quarterly data may not sum to year-to-date data due to rounding.(3) Core return on tangible equity is computed by dividing the total core income adjusted for the tax-effected amortization of intangible assets, assuming a marginal rate of 37.57% in 2017 and 35.0% in 2016, by tangible equity.(4) Non-GAAP financial measure.(5) Efficiency ratio is computed by dividing total core tangible non-interest expense by the sum of total net interest income on a fully taxable equivalent basis and total core non-interest income. The Company uses this non-GAAP measure to provide important information about its operating efficiency.

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Bar Harbor BanksharesJosephine Iannelli, 207-288-3314EVP, Chief Financial Officer & TreasurerorMarsha Sawyer, 207-288-3314EVP, Investor Relations